This paper theoretically investigates how labor-market tightness affects market outcomes if firms use informal and self-enforcing agreements to motivate workers. We characterize profit-maximizing equilibria and derive the following results. First, an increase in the supply of homogenous workers...

This paper studies how pay transparency affects organizations that reward employees based on their efforts (i.e., using “subjective performance evaluation”). First, we show that transparency triggers social comparisons that require the organization to pay its employees an “envy premium”....

Individuals use narratives as rationales or justifications to make their claims more convincing. I provide a general framework for partial verifiability based on narratives. Narratives give many reasons and arguments. The receiver derives the message's meaning by aggregating these reasons; her...

We analyze a repeated principal-agent setting in which the principal cares about the agent’s verifiable effort as well as an extra profit that can be generated only if the agent is talented. The agent is overconfident about his talent and updates beliefs using Bayes’ rule. An exploitation...